Switzerland’s Low End Watch Sales Fall in 3rd Quarter, Apple Watch Might Have Played a Role

| Analysis

Swiss watch exports declined 8.5 percent in the third quarter, including a 9.9 percent drop in September and a 10 percent drop in July, according to the Federation of the Swiss Watch Industry (via Reuters). While sales were down across the board, low-end timepieces in the Apple Watch price range took the biggest hit, and that could indicate Apple is having an impact on the industry.

A watchmaker at work

A watchmaker doing his thing
(Courtesy of Shutterstock)

To be fair, there were many other factors involved, too. In particular, watch sales in Asia fell some 12.5 percent, a decline that can likely be attributed to the economic slowdown in China. Watch sales in Korea plummeted 35 percent in September, and it's hard to imagine a scenario where Apple Watch is to blame.

That said, the fact it was a slowdown at the low end of the market, rather than the high end, might point to Apple's entry into watches. The 200-400 Swiss Franc (US$204-$408) segment of Switzerland's exports fell 14.5 percent. Apple Watch starts in that range at $349. In addition, those numbers indicate that the high end of the market is still doing well.

In a statement given to techradar, Kepler Cheuvreux analyst Jon Cox said, "The problem is further weakness of Chinese demand amid economic uncertainty and the ongoing fallout from the anti-gifting campaign [in China]. Over two-thirds of the value of Swiss watch exports comes from watches retailing on average at US$17,000 each—if you can afford one of those babies you can afford an Apple Watch."

To emphasize one key point he made: 2/3 of the total value of Switzerland's watch exports come from timepieces with a medium price of $17,000—that's an average price equal to the most expensive gold Apple Watch Edition.

At this point, few expect Apple Watch Edition to make a significant dent in the rich end of the market, but it will surely have an effect on Swiss time pieces anyway. While some analysts, including one cited by Reuters, think that Switzerland can partner with tech companies and make smartwatches that people will want, I don't think that's how it's going to shake out.

Instead, Switzerland is most likely to find success by offering high end mechanical watches with increasingly sophisticated smartstraps that monitor users and provide various levels of feedback, including discreet displays. As such, they will survive the smartwatch test just as they survived the quartz revolution of the 1960s and then the digital revolution of the 1970s.

In the meanwhile, I also believe that Apple will succeed in getting more people to reconsider their wrists as a platform for devices, and in the case of young people, get more to consider it in the first place. This, despite my feeling that Apple Watch is missing killer functionality.

One more note on this story: one quarter doesn't necessarily indicate much, especially this quarter. Economic factors alone could have had far more of an impact on Swiss watch sales than Apple Watch. These are still very early days for Apple Watch—Apple itself is playing a very long game with this device, and we won't understand it's true success as a product line for some time to come.

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In other news, pharmaceutical stocks rose at the close of the week on forecasts of increased sales of anti-hypertensive drugs in Switzerland.

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